Mnuchin at G-20 Plays Nice While Snubbing Rules of World Trade

March 18,2017 21:17

Mnuchin wasn't able to deliver a clear view on how the “America First” thrust of the Trump administration will mesh with the rules embodied in the World Trade Organization system that currently stand -- or even if the U.S. will remain substantially ...

When U.S. Treasury Secretary Steven Mnuchin left the Group of 20 meetings in Germany this weekend, the worst that delegates had to say about him was that heâ€™d been sent a little unprepared.It would be far more serious for the global system of multilateral organizations, like the G-20, if unpreparedness from U.S. officials were to morph into disinterest.Mnuchin wasnâ€™t able to deliver a clear view on how the â€œAmerica Firstâ€ thrust of the Trump administration will mesh with the rules embodied in the World Trade Organization system that currently stand -- or even if the U.S. will remain substantially engaged over the long term. As the administration is less than two months old, the former Goldman Sachs banker was given the benefit of the doubt when he didnâ€™t offer much detail.

But as the basics of Trump policy are diametrically opposed to the status quo, that still meant that on trade policy, delegates couldnâ€™t find much to say in unison.

The group set aside a previous pledge to avoid â€œall forms of protectionismâ€ and signed up to an inoffensive statement about working â€œto strengthen the contribution of tradeâ€ instead.Mnuchin made only one -- longish -- intervention during the main plenary debate in Baden-Baden, and when he did speak he read from a prepared statement, according to a person familiar with the matter, asking not to be identified as the session was private. Mnuchinâ€™s German counterpart, Wolfgang Schaeuble, admitted later that the American â€œdidnâ€™t have a mandate to negotiate new or creative wordingsâ€ on trade policy.Bilateral TalksThatâ€™s not a huge problem for now, as the G-20 can bump the matter to a leadersâ€™ summit in July. By then, the U.S. might have more deputies in place at the Treasury and Commerce departments, and have more to say.G-20 delegates were pleased that a U.S. representative was in front of them, and paying attention. Mnuchin said heâ€™d had 18 bilaterals and meetings on the sidelines.

â€œHe performed very well,â€ Australian Treasurer Scott Morrison said in an interview with Bloomberg Television. â€œHeâ€™s getting around, heâ€™s getting to know his colleagues, I think he sent some very positive messages in terms of engaging all the economies.â€Coming into the meeting, one issue that had been problematic in previous G-20s -- currency manipulation -- was this time uncontroversial, partly because Mnuchin hasnâ€™t been in such a rush to label China a guilty party in that respect as his boss had been during the campaign.Non-BindingBut the mostly genteel talks in the spa-town of Baden-Baden canâ€™t hide the risk of a fundamental cleft opening up in economic policy. U.S. unilateralism threatens to clash with everyone else, including countries like China who feel, as massive beneficiaries, duty bound to defend the current trade setup.Indeed, Mnuchin signaled that neither he nor the rest of the administration is willing to be bound by commitments that the international community has already made.â€œThis is my first G20,â€ he said at a press conference after the group published its final statement on Saturday. â€œWhat was in the past communique was not necessarily relevant from my standpoint."G-20 finance chiefs were disgruntled at the outcome of the meeting, if not with Mnuchin himself. Schaeuble said the fudged compromise was â€œdoesnâ€™t get us very far,â€ and his Russian counterpart, Anton Siluanov, said the issue will â€œneed additional discussion.â€ French Finance Minister Michel Sapin said he regrets that the talks â€œdidnâ€™t end in a satisfactory manner.â€Winners and Losers

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So far, investors havenâ€™t been much upset by the rhetoric from Trump and his officials, with the S&P 500 Index up around 10 percent since he was elected. Over the longer term, though, there will be a need for clarity over what the global trading system is going to look like if the U.S. is really going to reject the current one, according to Torsten Slok, chief international economist at Deutsche Bank AG in New York.â€œTodayâ€™s existing world trading system, the WTO, has been the result of a long process to hammer out all the details,â€ Slok said by phone after the G-20 meeting concluded. â€œIt remains unclear what the U.S. wants instead, but if you change the system you create winners and losers. Weâ€™re not even scratching the surface yet to figure out how thatâ€™s going to look.â€